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Diversification Threatens Company Valuation During Leadership Transition

Situation overview:

A company was preparing to make a significant, transformational acquisition that would take it into markets in which it had little experience. The timing of the acquisition coincided with a leadership transition that would put a first-time chief executive officer at the helm.  The deal was also not expected to be accretive in the first year.  Management wanted to minimize the potential negative impact of the acquisition on the company's value.

PROI member Role:

A  PROI Worldwide Americas Crisis Group partner designed and managed a comprehensive communications plan to support the company's announcement of the transaction. The plan included:

  • Developing an investor "briefing book" that provided greater transparency on the financial considerations of the deal, as well as the longer-range growth opportunities the new business would offer;
  • Hosting an investor call and webcast before the market opened the day of the announcement so management could reinforce messaging and proactively address investor concerns;
  • Orchestrating a multi-city investor roadshow that allowed management to take its message directly to shareholders and sell-side analysts; and
  • Expanding the investor audience through a series of one-on-one meetings with current institutional holders that had the capacity to take a bigger position in the company and potential institutional investors that had previously demonstrated an interest in the company’s new target market.

Results:

Thanks to strong messages and proactive communications, the stock did not dip as much as had been feared by management the day of the announcement. The stock valuation recovered steadily over the following weeks and ultimately surpassed the pre-announcement close.